Chris Christie’s latest budget gimmick

Tags:

Chris Christie, the Republican governor of New Jersey, is a master at distorting facts and attacking his political opponents. Politicians do this everyday, of course, but Christie is especially confrontational, and his go-for-the-throat approach must leave Democrats in the state legislature feeling bullied and weary.

For all of Christie’s aggression, little real governing happens in his state. New Jersey still has a structurally unbalanced budget. The state still relies on short-term deficit financing and other tricks to get the budget balanced at the end of the fiscal year. Since Christie took office in November 2009, the state’s debt load reversed its downward march and returned to the high levels last seen in 2005 under former Governor Jon Corzine. Christie’s rant in the video above about Democrats’ profligacy betrays his own actions.

Since February, when Christie proposed his budget for fiscal year 2013 (beginning July 1, 2012), he has been very optimistic about the state’s revenues and has been fixated on cutting the state income tax. Moody’s and others warned at the time that the tax cut was imprudent because New Jersey’s budget was based on fanciful assumptions. Here’s what I wrote in February:

I’ll translate the rating agency jargon: The state revenue projections are fantasy. If New Jersey gets lucky and revenues don’t fall short again as they did this year, then the state will end up with a cushion of $300 million to buffer a $32 billion budget. But if economic conditions slow at all (remember, many New Jerseyans work on Wall Street), then take out the midyear budget ax and start chopping. Basically the state is and will be running on fumes.

But Christie’s attack on Buffett obscures all that and shows him as forceful and in charge. In contrast Standard & Poor’s paints Christie as a fiscal illusionist. I just see him as another politician who promises the moon and prays he can juggle the books to cover his promises — or that he can get out of office before payment comes due.

Unsurprisingly, state tax revenues slowed in April, leaving a projected shortfall of approximately $500 million for 2012, and that is if economic conditions remain steady. Christie’s latest patch for the budget is yet another gimmick:

But the most controversial [Christie] move is to take $260 million in New Jersey Turnpike Authority money earmarked to fund transportation capital projects on a pay-as-you-go basis as part of a new Transportation Trust Fund reauthorization and use that money to help balance the budget. The $260 million was originally supposed to go to the Access to the Region’s Core (ARC) rail tunnel that Christie cancelled in 2010, and now that toll money will have to be replaced by an increased $260 million in borrowing.

Greenwald and Assembly Budget Committee Chair Vincent Prieto (D-Hudson) immediately connected the dots between the $260 million in borrowing required to balance the budget and the $195 million in revenue Christie needs to pay for the 10 percent across-the-board income tax he has proposed, which would disproportionately benefit the wealthiest taxpayers.

Christie’s Jersey Shore bluster and attacks on the Democrats do nothing to address the core budget problems of New Jersey. The state’s public pension plan remains woefully unfunded at 67 percent, and New Jersey faces some enormous deferred contributions in the coming years.

A word of advice to Governor Christie: Fewer budget tricks and fewer attacks on those who are charged with helping you govern the state would give New Jersey a better chance of solving its fiscal problems. Creating the “Jersey Comeback” you have been touting will only happen when the people of New Jersey are brought together in a shared vision for the state. Leaving those with whom you disagree bullied and battered is no way forward.

Author Profile

I’m Cate Long and I write about the retail fixed income markets including municipal bonds. My primary interest is creating tools and systems to help retail investors understand bond markets. I’ve worked for a number of years with industry standards organizations, regulators and Congress to help craft a more transparent and fair framework for investors to participate in the fixed income markets. I'm a guest contributor to Reuters.com. Any opinions expressed are mine alone.